The persistent drought in much of the country is causing immeasurable pain to farmers and ranchers. In addition, the receding waters of lakes and rivers are exposing old and often forgotten problems. There are old wrecks that remain on the bottom as sentinels of former tragedies, as well as rocks, boulders, unwanted trash and sandbars that were always present but previously covered up by the normal flow and accumulation of moisture—all of which have re-emerged to remind us of our potential limitations.
Another result of this drought is that commerce has been halted or diminished, thus old conversations about remaining permanent structural impediments have returned. Yet, a temporary seasonal drought is not the problem. The persistent, recurrent and unrelenting lack of moisture with no relief in sight is the real problem.
I don’t want to overstrain this comparison; however, the lack of life-giving rain is, in my mind, very similar to the lack of earned interest. There just seems to be no relief in sight, and this low-interest rate environment has exposed larger “rocks” that may be permanently hazardous to the health of LTC insurance.
Previously, the innate flaws in LTC insurance were simply not as visible, and contact was not as potentially catastrophic. Today there is no margin for error, no buffer and no clearance; many of our most popular benefits have disappeared with the evaporation of a rational interest environment. Pricing assumptions have become even more exposed without the ability to earn money on reserves. Underwriting must be even more precise and accurate. The new reality is that you will hit the rocks harder and sooner if you are not extremely careful.
The recession without end has exacerbated the oldest problems, which were never completely addressed in the past. Any and every obstacle makes a difficult sale even tougher to complete successfully. The necessity of finding a channel where there remains sufficient depth to proceed has become as clear as the exposed rocks in the harbor.
I believe the LTC insurance industry’s ability to navigate ahead can be condensed to what I call the “Big Three of LTCI.”
1. How much is enough?
2. What will our future partnership with state and federal government actually look like?
3. How will it be sold?
In my mind, there remains a real lack of consensus on how much insurance is adequate. I’m not even sure many in our business would agree on a definition of “adequate” protection. This is the basis for future product development, and it is necessary to increase sales. We must find agreement on what we are selling, to whom and why. We must also continue to grasp the concept that while catastrophic risk goals are compelling, there are also completely legitimate temporary partial risk goal solutions with perhaps even greater validity. Some insurance is better than no insurance; however, how much is “some” and what is its specific purpose?
All parties concerned have come to understand that we must find a greater symbiotic relationship with government programs. Each side must strive to accomplish what they do best while working in greater harmony to solve America’s largest unprotected risk.
Finally, there are some very large outstanding questions about who will be involved in making the LTC insurance sales and exactly where those sales will take place. The hard truth is that the exposed “rocks” are a blessing. We must finally come to terms with the essential elements of the risk, the appropriate insurance response, and where the responsibility for heavy sales lifting will fall. To be continued next month…
Other than that I have no opinion on the subject.
Ronald R. Hagelman Jr., CLTC, CSA, LTCP
CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products. A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing "friend" of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman is president of Broadtower Insurance Solutions, a national IMO helping BGAs enhance LTCI production. Hagelman can be reached at Broadtower Insurance Solutions, Inc., 156 N. Solms Rd., New Braunfels, TX 78132. Telephone: 830-620-4066. Email: firstname.lastname@example.org. Website: www.BroadtowerInsurance.com.